SACRAMENTO — For California voters, many election decisions are straightforward. Amid rising prices and frustration at the Trump administration’s heavy-handed immigration policies, they are likely to look at their ballots and pick anyone with a “D” after their name — although that’s admittedly not much different than what they do every election regardless of which party is running the federal behemoth.
Californians also face myriad detailed initiatives including a billionaire tax, reform of the California Environmental Quality Act (CEQA) and Voter ID. Those have received the lion’s share of spending and media attention. But every cycle voters also are asked to consider state bond measures. These are pitched as “free money,” which fund popular-sounding programs, but they are more involved than that.
Unfortunately, voters usually are suckers for them. Per CalMatters, “Californians love their bonds. Since 1976, California voters have approved 76% of all general obligation bonds.” The state pays $6 billion a year in payments for $80 billion in bonds, plus it has approval to sell another $40 billion worth, the publication adds. Even in California, this is real money.
There ain’t no such thing as a free lunch, yet bond backers pretend otherwise. Proposition 1 promises “affordable homes for veterans, seniors, people with disabilities, [and] low- and middle-income working families,” according to the “yes” argument. The $11.25 billion in new debt spending “requires strict fiscal accountability and public oversight with no new taxes.” Oh sure.
No one wrote an opposition statement, which reminds us of the difficulty in stopping such spending. California continues to face affordability problems, but these programs typically fund overpriced subsidized units. There are better ways to boost supply than running up long-term debt that will mainly benefit a certain class of developers.
Proposition 38 provides $8.4 billion in bonds “to support medical research in immunology and immunotherapy.” This one at least has opposition, with foes correctly noting that important research should be “guided through the normal budget process.” (Proposition 37 is bad but different, as home buyers will repay $25 billion in revenue bonds to fund down-payment assistance.)
State bonds are debt. General-obligation bonds, as the Department of Investor Relations explains, “fund various voter-approved projects and programs … such as building schools, university buildings, hospitals, housing, roads, mass transit facilities, parks and water delivery systems.” They don’t raise taxes like local bonds, but they lock in a portion of the budget to repay the debt, just as your mortgage and car payment lock in portions of your monthly income.
They create pressure for new taxes. If the state spends too much servicing its debt, it is incentivized to find new sources of revenue to backfill the diverted tax dollars. The state touts their importance in funding long-term infrastructure projects such as those mentioned above, but it too often is on the hook for debt to pay for tangential projects that should be funded through regular revenue or by the private sector. If these projects really are so important, then lawmakers should make some tough tradeoffs come budget time.
It’s one thing to take out a loan to repair the state’s freeway system. It’s quite another to pay for someone’s bright idea, whether it’s additional subsidized housing projects or immunology research. As the state’s Legislative Analyst’s Office explains, that $11.25 billion Proposition 1 bond will cost taxpayers $500 million to $600 million a year for 25 years to pay off, including interest.
And private groups with a specific interest in accessing the new funding often sponsor these types of ballot initiatives. For instance, one foundation has spent $40 million on the Proposition 38 campaign, according to CBS News. If it passes, the measure “dedicates half the money — $4.2 billion — to a single ‘unnamed’ non-profit. But the criteria for selecting that non-profit were written to exactly match” a new institute the initiative’s author is helping fund at UCLA.
This is nothing new, but voters shouldn’t have to pay the freight even if such research is a worthy idea. As this newspaper group opined, a measure of this magnitude should have gone through the legislative vetting process or, at the very least, should issue all funds through competitive bidding. Good reporting reminds us that these bond measures aren’t free — and that the fine print often reveals the questionable origins of supposedly noble endeavors.
I’m not suggesting that state bonds are never worthwhile. A recent State Auditor report found 57 of California’s dams are in poor or unsatisfactory condition. This poses serious risks to 1.5 million people and could cause billions of dollars in damage if even one of them fails. And these dams need at least $28 billion in upgrades. The state should have done a better job over time in maintaining these crucial structures, but bonds to fund this work should take priority over boutique projects.
So state bonds aren’t always unjustified, but they usually are taxpayer sinkholes.
Steven Greenhut is Western region director for the R Street Institute and a member of the Southern California News Group editorial board. Write to him at sgreenhut@rstreet.org.